AKRON (Dec. 19, 2005) — Whoa Nellie, what a year in the tire business. What with the hurricanes in the Gulf Coast region, the relentless rise in raw material costs, numerous price hikes and company buyouts, and increased competition for the retail, auto service and commercial tire dollar, the events of 2005 were enough to spin balance a tire dealer.
But in a year that seemingly had more than its share of negative news, there were numerous exciting developments that will impact the tire business for years to come.
Here are several of them and what they might mean.
* U.S. replacement passenger tire shipments hit a record 205 million units in 2005, the first time they've eclipsed the 200 million mark in any one year. For tire dealers, this clearly is good news. It means the marketplace is ex-panding and there continues to be opportunity for growth in tire sales.
At the same time, it's noteworthy that tire imports, especially from Asia, account for most of the growth in shipments. Tire dealers can expect to see more of their inventory coming from overseas plants, whether owned by domestic or by foreign tire makers.
* The opening of Toyo Tire & Rubber Co.'s White, Ga., tire plant late in the year continued the industry evolution toward more automated tire manufacturing. Toyo's plant—about 10 miles away from another highly automated factory, Pirelli Tire North America Inc.'s MIRS (Modular Integrated Roboticized System) plant—operates without any human contact with the tires until after the first inspection following curing.
Toyo's Advanced Tire Operation Module (ATOM) technology is designed for multi-product, small-lot production. For tire dealers, such manufacturing flexibility addresses issues like tire aging and the growing number of SKUs by allowing for more just-in-time and need-specific production. With no splices and more precise tire building, tire uniformity also is im-proved dramatically.
* The surprising number of large tire distributors changing hands this year bodes well for these companies and for their tire dealer customers. The new owners likely will pump money into their new concerns, helping them expand and provide better service.
With the number of tire SKUs on a seemingly endless climb, independent distributors have gained importance to tire retailers by moving millions of tires across the country to keep dealers stocked, often several times daily, with the lifeblood products they need.
And yes, the fact that so many private equity firms see positives—and profits—in investing in the mature tire business is a vote of confidence in the industry's health.
While competition for tire consumers' attention and retail dollars continues to ramp up—no, the car dealerships selling tires aren't going away—there have been a lot of positive developments for the industry in 2005, and we hope the new year will hold many more positives for independent tire dealers.